How to include cryptocurrencies in company accounts?
As an introduction, what is cryptocurrency?
Cryptocurrency, also known as a virtual coin, is an alternative solution to the constant inflation of traditional currency introduced in 2009. It was created using a special cryptographic system that also allows each set of “coins” to be assigned to a specific holder. To date, cryptocurrency has not been recognized as an official means of payment or a full-fledged currency by most countries. However, due to the growing popularity of this “metal,” including in the business community, some governments have begun work on introducing a digital coin as an official currency. Furthermore, under current European Union law, cryptocurrencies are considered a full-fledged means of payment and are therefore exempt from VAT. Although the term “cryptocurrency” itself is not found in income tax laws, it does use the term “virtual currency.” The definition of this term comes from the Act on Combating Money Laundering and Terrorist Financing.
How they perceive it: Cryptocurrency through the eyes of the law
With the growing interest of businesses in cryptocurrencies, so too has the interest of legal authorities. The increasing frequency of transactions conducted using digital coins, including among businesses, has forced the financial authorities to introduce appropriate regulations. Proper documentation of these types of transactions is extremely important from the taxpayer’s perspective. Since settling cryptocurrencies involves high costs and expenses, in the event of inaccuracies or omissions in the documentation, the Tax Office may question the entrepreneur’s right to settle their income tax-deductible costs.
How to settle it: Cryptocurrencies in a company
Changes to the regulations regarding the settlement of income from cryptocurrency trading were introduced after 2018. Until then, cryptocurrency income could be recognized as part of business operations. At that time, it was not considered a separate source of income. Currently, such transactions must be accounted for as income from capital gains. Under the regulations in force since 2019, income from cryptocurrency trading is subject to a 19% personal income tax (PIT) based on the amount of income earned. Because these regulations came into effect relatively recently, and cryptocurrency itself is not yet sufficiently regulated, entrepreneurs investing in virtual coins may exercise the right to reduce their income calculated in a given year by tax-deductible costs that were not deducted in previous years.
